Celebration and Confusion at the Fed

For all the criticism and threats to its independence that the Federal Reserve has endured in recent years, this is one Washington institution that has earned the right to celebrate. History will show that the U.S. central bank played the largest role in the effort to rescue the U.S. and indeed the global economy from a near disaster.  The Great Depression of the early 1930s was a life and society threatening event, and the U.S. almost repeated history. Were it not for the quick actions of the Fed and a few other central banks in 2008, the deepest downturn since the 1930s would have resulted not in a peak unemployment rate of 10%, but something much higher, possibly requiring another decade for a full recovery. Instead, ten years after the near financial and economic collapse of late 2008 and early 2009, job growth remains strong, the unemployment rate is hovering at a 16-year low, economic expansion is now the third longest in history, and there is little sign of recession on the horizon. Further, the global economy is now showing measurable improvement. That’s a lot to be proud of.

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The Impact of Hurricane Harvey on the U.S. Manufacturing Outlook

By now, the staggering physical impact of Hurricane Harvey, with its overwhelming 52 inches of rain, is well known. There are 58 counties in Texas alone that have been declared disaster areas and are thus eligible for federal disaster assistance. Tragically, there are more than 60 deaths known thus far. Houston is the fourth most populated city in the U.S., so U.S. housing stock as a whole is significantly affected. While estimates vary, NPR quoted the White House on September 1 stating that 100,000 homes were impacted by the storm.

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ISM Report, JobsKristin Graybill
Troubling Signs Amidst Persistent Strength in Employment Numbers

Employment remains a star in an otherwise lackluster economic expansion. U.S. employer payrolls swelled by a strong 209,000 in July, and the unemployment rate fell a tick to 4.3 percent, remaining at a 16-year low.  Even with the sluggish GDP growth of recent quarters, it is clear that the U.S. economy is growing above its long-term, non-inflationary potential, creating a strong demand for labor even after eight years of economic recovery and expansion.   

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JobsErin Graziani
Growing Reasons for U.S. Manufacturing Optimism

In spite of the modest drop in the Institute for Supply Management’s (ISM) widely-followed Purchasing Managers’ Index (PMI), U.S. manufacturing growth remains on a path of considerable improvement. After reaching 57.8% in June, more than 3 percentage points above the current 12-month average, the PMI slipped by 1.5 percentage points in July to a still strong 56.3%. Key survey indices such as new orders, production, and the backlog of orders remain in solid growth territory although they all fell modestly last month. New orders and production indices are rarely above 60% but held that level in July. At 55%, the backlog of orders also remains strong, suggesting that there is pressure on production schedules, which is lending momentum to current manufacturing output gains.

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